The daily minimum wage will increase by 16% on January 1 to 102.68 pesos (US $5.10), the federal labor secretary announced today.

Luisa María Alcalde also announced an even bigger hike in the northern border area, where a free zone with lower taxes will be implemented at the start of next year. There, the minimum wage will double from its current level to 176.72 pesos (US $8.80) per day.

Speaking at an event attended by President López Obrador, other cabinet secretaries, members of the private sector and workers’ representatives, Alcalde said that for the first time in many years the minimum wage has been set at a point that is on par with the minimum threshold for individual wellbeing, or the poverty line, which is determined by the social development agency Coneval.

“[It’s] a first step in the right direction,” she said.

López Obrador, who has pledged that “the poor will come first” during his government, described the salary increase as “an historic event because together we begin a new stage in the salary policy of our country.”

Economy Secretary Graciela Márquez Colín said the larger increase in the border region “won’t have inflationary implications” but “will have a positive effect on the purchasing power of workers.”

Prior to today’s announcement, the Mexican Employers Federation (Coparmex) said the National Minimum Wage Commission (Consami) had reached the decision to increase the wage unanimously.

At his morning press conference, López Obrador said that workers’ representatives, the business sector and the Bank of México had all participated in negotiations and reached an agreement that avoided any impact on inflation.

Consami’s resetting of the minimum wage level today comes just three days after its former chief was dismissed.

Basilio González Núñez headed up the minimum wage commission for 27 years but was removed by Alcalde, who appointed Andrés Peñaloza Méndez to the role.

The labor secretary wrote on Twitter Friday that Consami will experience “winds of change” under the leadership of Peñaloza, an economist.

Alcalde, a former federal deputy and professor of law who has published several articles advocating for higher wages in Mexico, said in August that the new government would be committed to increasing the minimum wage and doubling it in the nation’s north.

However, even with the increase set to take effect on New Year’s Day, Mexico will continue to have one of the lowest minimum wages in Latin America.